Fleet Financial

A Shareholder Resolution on Executive Pay and Downsizing

WHEREAS, despite record profitability in the 1990s, U.S. corporations have laid off record numbers of workers, arguing that cost-cutting is one key to long-term competitiveness and increased profitability;

WHEREAS, only 44% of firms that downsized employees saw a rise in operating profits, according to a 1992 study by the American Management Association. The same study found that only 31% of corporate downsizers experienced productivity gains following the layoffs, while 77% experienced deterioration in employee morale. A second study of 1,000 large companies conducted by the Wyatt Company found that less than one-third of the companies surveyed hit profit targets projected at the time of the restructuring;

WHEREAS, a 1992 study by the Haas School of Business at the University of California as Berkeley found that firms with the widest pay gaps experienced lower quality. A study published in the Journal of Organizational Behavior found that high levels of executive compensation generated cynicism among white-collar employees;

WHEREAS, as a result of its merger with BankBoston, Fleet has announced that it expects to lay off 2,500 employees;

WHEREAS, we believe that asking employees to sacrifice, while at the same time rewarding executives, sends a mixed message to employees, suppliers and shareholders. We believe that business success over the long term is enhanced when business is viewed as a shared enterprise in which both the rewards and sacrifices are equitably shared among all employees;

WHEREAS, corporate leaders should have a long-term view when making management decisions. If decisions to cut costs are in the long-term best interest of the company, executives should be willing to defer their rewards until positive results are demonstrated. Rewarding cost-cutting executives for potentially good future performance is in conflict with standards of good corporate governance;

RESOLVED, shareholders request that the Board adopt an executive compensation policy that freezes the pay of corporate officers during periods of downsizing in which the lesser of 5% of the company's workforce or 1,000 workers lose their jobs. This pay freeze shall continue for a one-year period following the completion of the layoffs.

SUPPORTING STATEMENT

Times of widespread layoffs are difficult for any organization. Employees see their co-workers face the stress and financial insecurity of losing their job. Many employees will be asked to assume additional responsibilities, learn new skills, and develop new customer relationships.

A climate where executives reap enhanced rewards while their co-workers are asked to sacrifice can lead to poor morale and a deterioration in customer service. This resolution asks Fleet's officers to put the long-term health of the corporation ahead of their own short-term financial gain.

PLEASE VOTE YES!

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